arbit – Page 77 – Pertinent Observations

On Being a Geek

I’ve always been a “topper types”. I started topping class when I was in first standard (and no, they didn’t announce ranks before that), and as if that wasn’t enough, my parents made sure that all relatives, and all teachers in school knew about my superhuman arithmetic skills. And as if even this wasn’t enough, I became the first guy in my class to wear spectacles. In a few years’ time, I went on to represent my school in supposedly intellectual pursuits such as quizzing and chess. I had been consigned to living life as a geek.

There were several occasions when I wasn’t really the topper; wasn’t even close to being a topper. However, something or the other ensured that I managed to maintain that geeky aura. In school, and at IIMB, I was supposed to be really good at math, and that made me geeky. Things were differnet at IIT – since a number of my classmates who trumped me in acads were also better than me at other geeky things. However, I think the fact that I was studying CompSci made me feel geeky, and I never lost any opportunity to show off my geekiness.

In this context, the last two years were quire awkward, as I was in a couple of non-geeky jobs. For the first time in almost twenty years, I had to go out of my way to demonstrate my geekiness, and given that those jobs didn’t need me to be a geek, things didn’t go quite well. I used to try and shove in lines into my conversation such as “we used to play chess in the classroom at IIT. since we couldn’t carry in chessboards, we used to imagine a board and play on that”.

It was very awkward. Thinking back, maybe that was one of the major contributing reasons to my not being too happy in the jobs. I wasn’t able to play my natural game. I had to invent a new me that would go to work daily. And it wasn’t just about the geekiness factor, but this was one of the important reasons, I believe.

Now, working as a strategy guy in a quant hedge fund, I feel I have every right to be geeky, and am well and truly back in form. I lose no opportunity to crack geeky jokes. I try to bring in analogies from various geeky fields I’ve been acquainted with – math, computer science, finance, and even physics. And I don’t mind making things complicated just so that I can slip in that geeky analogy that I think is “beautiful” and “elegant”.

Two days back, i was talking to Baada on the phone, and I smelt an opportunity to crack a geeky joke. We were discussing football while watching Liverpool play Chelski. And then suddenly I asked him if he knew the concept of inversion in geometry. When he replied in the negative, I spetn the next ten minutes explaining the concept to him, all so that I could slip in that one little geeky joke.

Beware of me, I would say.

Random

It’s a strange feeling when you are feeling high but you know that a bout of NED is inevitable. You know the high won’t last long, but you can’t even enjoy it while it lasts since you are already worried about your ability to handle the impending NED.

The reverse though never happens. When I’m at NED, I never get forewarned about an impending high. This means that all the time in NED is spent completely in NED. There is no compensation for the time you wasted when you were high thinking about NED. The world is more one-sided than I thought.

A stranger feeling is when you are rapidly oscillating between two widely different states. High amplitude. High frequency. It’s like almost being in two places at once. It’s almost like being two people at the same time. Feels extremely strange while it lasts but then in hindsight you get a kick thinking about it.

I think I should write a book.

Snow White meets Gandalf

I don’t know how to describe it. “Writing club” or “literature club” makes it sound too serious, and if it were indeed one, then we need not have put “informal” when we put it in our CVs. “Slander club” makes it sound like we were all bitches, which we were not – though I must admit that once in a while we used to bitch a bit. We weren’t even doing campus journalism – we were hardly regular, and never came in print. And we weren’t storytellers, either, since most of what we wrote was based on what actually happened.

Twisted Shout began when Hunger tried to murder War. However, the defining moment for the group happened when Snow White Meets Gandalf (a trilogy in five parts) was released. I must say it was a fairly random story. So random that most of you won’t understand it. If you are not from IIMB, you can give up every hope of figuring it out. If you are from IIMB but not from our batch, you might understand one joke in the entire trilogy. If you are from IIMB and from my batch and not from my section, you might probably understand half the stuff.

SWG had so many characters that I won’t blame you if you would get confused. Most of these characters are based on people in my batch and the batch senior to mine at IIMB. And it’s not a one-to-one correspondence between real and fictional characters. Some people in my batch were so colourful that multiple characters were based on them. On the other hand, the entire commie half of Sumo Yet So Far (my quiz team) had gotten merged into one character called Swaadisht.

We drew inspiration from several sources, with the primary source being our first test in Economics, which had a certain Queen Shilpa taxing coconuts. A number of other characters, and scenes were built based on interactions in class in term 1. There was heavy punning on people’s names, and even seemingly random sentences like “I find Aishwarya Rai so hot that I want her as my wife” found their way into the stories.

If my memory serves me right (it usually does in the long term), the first three parts of the Trilogy were written by Disease, who then proceeded to put NED (this was a full three years before the term NED was coined, btw). Madness, the correspondent from H Base, joined the great institution when he wrote the fourth part. The fifth part, which involved a Great War, based on the Mahabharata, was appropriately penned by War. And he had ensured that he gave due footage to himself, as well as to the Footage Queen.

The beauty of the series was that characterization was not constant. People would change sides more frequently than Disease would change his shorts – which means that they didn’t change sides too often, but did it once in a long time. Characters would disappear from the plot, and occasionally reappear at a strategic time. There would be sudden updates in relationships between characters – to account for similar changes in the real world. Every event of note that took place on campus, and even some insignifcant ones, got due footage. It was a masterpiece of its times.

Looking back at these stories today, I’m feeling nostalgic, and at the same time proud to have been part of such an august institution. We were to come up with a few other masterpieces during our tenure, but SWG would remain our best known work.

Two months back, more than three years after we had first folded up, we thought we should make an attempt to recreate the magic, and thus started the Twisted Shout blog. I admit that we haven’t been too regular in updating it, but each of us has been managing an important transition in our lives, and thus haven’t really had the time to update it. We hope to fix this in the coming months, though I’m not sure how funny we will be since we will be writing for a general audience. In hindsight, it was really easy writing for a restricted audience that knew exactly who each character was based on. Making inside jokes, it seems, is much easier than making generalized jokes.

Bloomberg Watching

Two weeks back we were all given dual screens at office. A couple of days after that, those of us that had joined recently got Bloomberg logins. It’s a very restricted version of Bloomberg, with most of the strong features having been disabled. One feature that is enabled, though, is to get the graph of the daily price movement of a security, or an index.

It is necessary to have hobbies at work. It is humanly impossible to concentrate solely on the work for all the eight or ten hours that you spend at office. You need distractions. However, in order to prevent yourself from being too distracted, it helps having one or two very strong distractions. Distractions which can crowd out all other distractions. They can be called “office hobbies”.

In the past, my office hobbies haven’t really been constructive. In my first job, I was part of a PJ Club, and we would exchange horrible jokes. By the time I got to my next job, I had been addicted to Orkut, and kept refreshing it to check if I’d gotten any new scraps. Of course, when there is a cricket match on, the Cricinfo screen makes for a good office hobby. In the last ten days, the World Chess Championship has served my evenings well. However, it is important to have a sustainable hobby which could also be constructive. One which might have a small chance of making impact on your work. And most importantly, it would be ideal if the boss doesn’t really disapprove of your office hobby.

For the last week and half at work, my right screen (remember that I have two screens) has been reserved for Bloomberg Watching. A Bloomberg window is open there in full size, and I would’ve usually put the daily movement graph of the Nifty there. And it updates real-time. It’s like a video game. I just sit and watch. And get fascinated by the kind of twists and turns that the markets take.

Twenty years back, I would spend my evenings in the courtyard of my grandfather’s house in Jayanagar watching ants move about. I would be fascinated by their random, yet orderly movements. I would spend hours together watching them.

Around the same time, I used to play another game. I used to splash water on the (red-oxide coated) walls of my loo, and watch the different streams of water flow down as i crapped. I would get fascinated by the patterns that the water droplets would form, the paths that they would take, the way they would suddenly change speed when they intersected, and so forth. I would end up squatting there long after I’d been done with my crap.

So what I’m doing now is not exactly new. I just watch a point move. Orderly from left to right. Wildly fluctuating in the up-down direction. I look at the patterns and try to guess which animal they look like, or which country they look like. I get fascinated by the sudden twists and turns that the curve takes, and wonder about the collective wisdom of all market participants who are faciliating such movement. I occasionally scream out to my colleagues saying stuff like “nifty below 2600!” and they respond with a “behenchod…” or some equivalent of it.

As the day wears on, I realized that some animals I had recognized earlier in the day are hardly visible now. They are but specks in the larger graph that is the day. And then I realize that unless there was something truly special, the movement of the day will also soon be lost. It will be available for download from the same Bloomberg terminal but that will be about it. And so forth.

Occasionally I catch some unsuspecting soul on my GTalk list and spout such philosophy. I tell them about how after a while everything becomes insignificant. About how we will always be just small players in the larger system. The smarter among them will add their own philosophy to mine, and sometimes we come up with a new theory. The not so smart among them – they will ask me about my views on the market. And what would be good picks (this has been a regular question I’ve been asked ever since I got back into the finance industry but more about that later). And then they say something like how terrorists are the reason the stock markets are plunging, and how the government should protect investors’ money and stuff.

Some day I hope all of this will be useful. Some day I hope my eye for recognizing animals and countries where none exist will enable me to come up with some earthshaking strategy, which can make millions for my fund. However, now that doesn’t matter. All that matters is the unbridled joy of watching the ticker move up and down. Rise and fall. Take baby steps, and the occasional giant leap. It’s surreal.

Revisiting the Queen of Hearts

I stumbled upon this post I had written some two and a half years ago. I had drawn an analogy from bridge and had argued that if your achieving something is conditional on a certain uncertain event, you should assume that the event is going to go your way and take your best shot. I want to add a caveat. Let me take you back to the bridge analogy.

Suppose you are playing for IMPs (international match points). You have bid Six Spades. And after the lead and dummy come down, you know that you will make your contract if and only if the Queen of Hearts lies west. As per my earlier advice, you must just assume that and go for it. Unconditionally.

You think again. You see that there is a risk-free way of getting to eleven tricks – one short. And by taking this approach, you know there is no chance of your getting the twelfth. However, if you play for the Queen of Hearts to be with west, and if she turned out to be East, you will end up going say four under, and will be prone to lose heavily.

My earlier advice didn’t take care of costs. All it assumed was a binary payoff – you either make the contract or you don’t. And in that kind of a scenario, it clearly made sense to go for it, and play assuming that the Queen of Hearts lies West. However, when there are costs involved, and how many tricks you go under by makes a difference, you will need to play percentages. You go for the contract only if you know there is a reasonable chance that the Queen is West (you can figure out the cutoffs by doing a cost-benefit analysis).

There is one thing you can explore, though. Is there a play which gives you extra information about the position of the Queen of Hearts? While still keeping your options open? Can you find out more information about the system while still having the option to go for it or not? I think, if there exists this kind of a play, you should find it and play it. And the letter I wrote last week, I think, falls under this category.

Unifying the ladders

Following my post on Alonso and delta hedging, I’ve been involved in excellent conversations with a number of friends. I’ve got loads of advice, mostly solicited, on how I should go about the blading process. And there have been a number of other insights also, with a lot of theories having been generated on the Ladder Theory. Note that a working knowledge of this theory is a pre-requisite to your understanding the rest of the post. If you don’t know the theory yet, I request you to read the Wikipedia entry on the same right now, before you continue to read this.

I’ll start off with some insights from a few recent conversations

Anuroop says at the very top the two ladders converge.
Vyshnavi concurs. She says that one way of getting into a relationship is to climb the wrong ladder, and then hope that you get invited across the bridge.
I told this to Baada, who says that the funda of two separate ladders is not part of Indian culture, and that the ladder unification thing is true, and this is specific to India.
A while back, Nityag had told me that she would rather marry a friend rather marrying a raondom guy whom she met at the arranged marriage market
Earlier today, MC told me that she was scared about the arranged marriage market. That she was scared about committing to a stranger, scared of marrying someone she wasn’t in love with.
One of the rumours floating around regarding my cousin’s broken engagement is that she called it off after she got psyched out by the idea of marriage, and marrying someone whom she had met only a couple of times before.

Ok, now that the background has been set, here is the theory. What sets the scene in India apart from elsewhere is the presence of the arranged marriage market here. Here, if you have failed to find yourself a partner by a parental deadline, you are entered into the great arranged marriage market (in fact, occasionally you can be entered into this market even if you’ve found yourself a partner, but let’s not go into that). The thing about this market is that you need to make your decisions quickly, without giving or receiving much blade. It is likely that when you do commit, you are effectively committing to a stranger.

If you are a guy, you are in the arranged marriage market because no one who was sufficiently high up on your ladder (remember you have only one) was willing to marry you. Similarly, if you are a girl, you are in the arranged marriage market if no one who was sufficiently high up in your “good” ladder was willing to marry you. But what about your other ladder ?

Isn’t there a set of friends on your “friends ladder” who, if given a chance, would love to marry you? Isn’t there a subset of this set who are high enough on this ladder that you won’t mind sharing a house with them? Wouldn’t it be possible for you to convince yourself that you would be able to sleep with a subset of this subset? If this subset of a subset is non-null, then I think you are in luck. You do have hope.

Don’t you think it’s better for you to marry a friend rather than marry a stranger? Aren’t the odds of making the relationship work with a friend so much better than those of making things work with a stranger? That he is your good friend means that there is a certain basic minimum level of compatibility between you guys. Are you sure you can say that about the guy you meet in the market, after you’ve talked to him once, or maybe twice? If you are still reading, it is likely that you are going to accept the unified ladder theory.

So, my dear girls, what I’m saying now is not at all in my self-interest but I think it will be useful to you. Do enter the arranged marriage market by all means, but it would help if you could make a small list of boys high up on your friends ladder whom you won’t mind marrying, and who won’t mind marrying you. Use them as a benchmark while you evaluate the guys in the arranged market. And remember that you are more certain regarding compatibility with respect to your friends than the person you are meeting in your market.

Use your friend as a benchmark and all your doubts will melt away. If you do find a truly exceptional guy in the arranged marriage market (trust me there will be some; there will be at least one really exceptional in the market in a year or two) nothing like it. Else, you can think of “cultivating” the friends. Extend a ladder bridge to them. Convince yourself that it is ok to be in a relationship with them. And let them know the change in your stance, that you are willing to give them a bridge. Adn start this process early enough, so that even if all your friends ditch you, there is still the arranged marriage market to fall back on.

Anuroop, Vyshnavi, Baada – what you guys say is right. The ladders do converge at the top. But only in India. And I think i have the reason for that.

Kodhi, and all you others who consider yourselves to be master at being GBF* – there is still hope. This theory shows that there is still hope. Bless the arranged marriage concept for that. There is still a small chance that your GBF^(-1) might want to marry you. Keep up the good efforts. And never lose hope. There can be a bridge high up on the ladder.

*GBF: gay best friend. Refers to guys who are really really close to a girl, without any realistic chance of sleeping with them.

Following up on my masterplan

In my earlier post on this subject, I had written that I might possibly put the contents of the letter I wrote on this blog. On second thoughts, however, I decided that those contents were mostly a private matter between me and the person the letter was intended for, and so it won’t be a good idea to post it on the blog. However, there are a few lines which I came up with which I think I’m fairly proud of. So as to not to disappoint you readers completely, here is one of those:

There is no point in my narrating the Ramayana for a year and then you saying that you thought I was narrating the Mahabharata.

To compensate for not putting the full letter as promised, I am putting here Rahul RG’s excellent commentary on the issue. RG was 3 years my junior at NPS Indiranagar, IIT Madras and IIM Bangalore. It’s in the form of a GTalk conversation. It’s slightly longish so I’ll put it under the fold.

Continue reading “Following up on my masterplan”

Breaking engagement

Another wedding of someone I know got cancelled. This is a second cousin, and she was supposed to get married one of these days. And the engagement was called off very recently. I have heard various stories about the reasons behind it, with the sum total of all stories sharing the blame between the bride, the groom, the bride’s family and the groom’s family. However, most of the stories sound speculative; rather, they look like cover ups, so I won’t go into them.

This was one of those typical NRI engagements. Boy comes home from US. Scrutinizes CVs on the way home from airport (ok nowadays this will be a long drive, but this is a slightly older story). A shortlist has been prepared by the time the boy reaches home. Dad sits by the phone and arranges interviews with each of the shortlists. From the boy’s perspective, it is more hectic than the placement process at IIMs. Sees a hundred girls in a couple of days. Vaguely remembers some of them and makes his choice.

Most girls who have lined up would be the types who are desperate for a foreign gandu (disclaimer: the a between g and n has to be pronounced short). Most offers get quickly accepted. And an engagement is hurriedly arranged for. Boy gets engaged and goes back. Girl gets ready to apply for a US visa. Girl’s parents make arrangements for wedding.

I had blogged about a similar topic before, and like I had said then, my take is that it’s a good thing that the engagement has been broken. A broken engagement is significantly better than a broken marriage. It is good that whoever were the parties who were responsible for the breakup, they had the foresight to realize things early enough and managed to prevent a mess. Yes, the boy and girl will have the stigma of broken engagements, but that’s again better than being divorced, right?

I think the blame should go to the generalized model in which arranged marriages take place. My personal contention is that arranged marriage is a great thing – it gives you the fallback option of finding a partner for you in case you aren’t able to find one for yourself in the normal course of things. It’s great that someone (usually parents) does the due diligence for you before you even meet the potential partners. It is great that there is a formal mechanism which gets you introduced to so many people of similar age from the opposite sex.

However, given some restriction that people from earlier generations have put, the full power of arranged marriages is not being unleashed. Ideally the role of the bankers and the brokers should end once the due diligence has been done and the two parties have met. Reality is far from the ideal situation. Time limits are imposed upon the length of interactions. One doesn’t get the opportunity to collect complete information before making a decision. There are too many people lobbying for their favourite candidates. Multiple rounds of interviews are not permitted. Decisions, sometimes, have to be made “online”, in real time. And in certain cases, it is the bankers that make the final decisions, not the parties.

Ok I might be repeating myself but my rant is that arranged marriages are not being arranged the way they should be. This is producing wildly suboptimal results, and surveys won’t show the suboptimality of results. There will be too much selection bias since successful marriages are usually more visible than unsuccessful ones. And my intuition tells me that there are too few data points to get meaningful results for marriages that have been arranged the right way.

The right way? Yes. Bankers do the due diligence. Brokers and clearinghouses create liquidity in the market. Then they collect their fees and quietly exit, leaving the rest to the parties. Unfortunately apart from one friend (who is getting married next week) I don’t know anyone who insisted on this kind of a procedure. And this friend too was roundly bitched about in family circles for “spoiling girls’ lives by going around with them without hte promise of marriage”.

One last point. I must write about what Sunayana had pointed out in a comment on this blog last week. About how you are not supposed to be seen in public with an unrelated member of the opposite sex. For this can create problems in due diligence. I think if this one condition gets relaxed, arranged marriages will turn out to be much more successful. As will arranged engagements. So bankers, listen out. Remedy this before I hit the markets – which is in about two years’ time.

On Alonso and Delta Hedging and Creating Positive Black Swans (and louvvu of course)

Yesterday, on the Twisted Shout blog, I had blogged about Xabi Alonso, and his methods for scoring goals. Complete with videos of a few of his goals, and incomplete because I couldn’t find a few other videos, I explained how he goes about the entire process. He takes long shots, I had explained. From a distance. Hoping to catch the goalkeeper off guard. And accurate enough to get the ball in the net most of the time.

Towards the end of The Black Swan, Nassim Taleb talks about how you can make black swans work for you. He talks about industries such as moviemaking and book publishing, and he says they traditionally thrive on positive black swans. They lose a little money on most projects – books or movies, but make significantly more money when one of them succeeds.

The book industry, Taleb argues, has now lost its traditional revenue model. Nowadays, the norm for publishers is to dole out huge advances to authors who will potentially write blockbusters. This, Taleb says, now exposes the publishers to huge negative black swans. The advances are so huge that if a book sells well they recover their investments. If not, they are prone to losing a huge amount.

I notice a similar problem in the romance industry. Suppose you have been hitting on, or even seeing, a girl for a long time, and it’s now time for measurement. By conducting the measurement experiment now, you are exposing yourself to a huge negative black swan. You have already made considerable investment in the relationship, mostly emotional but also monetary and temporal. And what if the measurement doesn’t go the way you want it to go? You are already in the D (desire) of Kotler’s AIDA. It will take a long time for you to recover from it, and this could even be career threatening, as I had discovered the hard way a couple of days years back.

Now, my theory with relationships (I don’t know how much you want to trust this – since I’ve never been in a relationship) is that in order to succeed, both parties should be at least in the I (interest) zone. And one of the parties has to be in D zone. This is a necessary but not sufficient condition for the relationship to go thorugh.

So, how about testing whether the other person is in the I zone when you are also in I zone? If she is, then well and good – you can start the process of figuring out if you want to get into D, etc. If she isn’t you can quickly cut your losses and move on. If she does admit to being interested in you, it’s great. It’s a positive black swan. And if she tells K, you haven’t really invested much in the relationship so it shouldn’t be hard. Right? So that’s how my mind ran when I thought about this problem yesterday.

I sent her a mail asking her for permission to put blade on her. I explained to her in the mail (i’ll probably blog the mail at a later date – I’m quite proud of my efforts on second thoughts I won’t blog the mail. I think she deserves exclusivity to that masterpiece) that I ever since I met her a few days back I have gotten really interested in her, and am considering the possibility of blading her. That if she is not interested in getting bladed by me, then there is no point in my continuing and wasting both our times and energies, and so she should tell me that right now. I sent this mail to her earlier this evening and I’m still awaiting her reply.

So where does delta hedging fit into this? It is like the road to Ithaca as this poem mentions. It is about the journey being more enjoyable than the destination. It is about the process of doing something being more enjoyable than the results. It is from the excitement you get just by doing something for the heck of it. These are all what I call as second order effects. They are, in effect, derivatives. First order derivatives of something you are doing, which is effectively the underlying.

As I had mentioned in my previous post, by going ahead with the blading, the only thing I had to lose was my confidence. My form. And if I had gone about blading the conventional way, poking and probing, and making small inroads, the process too would’ve been excruciating, and would’ve added to the pain of the blade not succeeding. So was there a way in which I could hedge out the loss of form and confidence?

I think I’ve been fairly ingenious in going for my long shot. I’m doing something unusual by going about it the unconventional way. Add to this the joy of sitting and drafting that letter to her (yes, it’s a masterpiece). And the possibility of the insights I might gain from this process. And of blogging it, as I am doing now. As soon as I had hit upon this method, i realized that the second order advantages from this were huge. And would easily hedge away any blues that failure in my attempt would bring. It was like getting a put option along with a stock. You knew that your losses were capped.

On the other hand – if she accepted – the returns would be huge. It would be a positive black swan. Capped losses and uncapped gains! Once I had figured this out it was a no brainer that I should go for it. And I have gone for it. A long shot a la Alonso. And I’m waiting for the result. Wish me luck.

Vyaasa and correlated hedges (and louvvu)

Some follow-up over my yesterday’s post on louvvu. This is a little arbit so if you are the serious types, you needn’t read on.

I’ve been told by my “ex-bladees” that i can become ferocious and scary when I’m putting blade. I don’t konw what it is about me, but it seems i become very intense when putting blade and that immediately puts the woman off and she gets scared of me. This reminds me of Veda Vyaasa. Vichitravirya’s wives were paranoid when he came to them in order to help them prolong the Kuru dynasty. One shut her eyes so tight that the kid was born blind. The second went so pale that the kid was born paler than Nicole Kidman and Andres Iniesta put together. And for the third night, they just decided to send a maid.

The difference between then and now was that back then the women were forced to sleep with Vyaasa just to ensure the continuity of their dynasty. They had no choice. Now, though, if the woomaans see a ferocious blader, they’ll just run away. Ignore. Become hostile. And I don’t think it’s been pre-ordained that I’m going to be instrumental in the prolongation of any dynasty. I think I should just stick to writing stories.

Over the last few days, I’ve been on high amplitude high frequency. Hyperactivity intervowen with extreme NED. I realize I’m a flow person. When things are going fine in general, I’m able to do everything else also quite well. Assume that for hedging purposes I do more than one thing at a time. If something goes bad in one of those, then it pulls down my performance in the rest too. It affects my form in general. It’s something like VVS Laxman losing badly in a game of tennis. And finding the next morning that he can’t hold a cricket bat.

So yeah, given that I’m a bad blader, if I do end up putting blade in the case I described yesterday, I have a feeling it might have a much bigger impact in life. Because the different threads in my life are usually so intervowen, I rarely come across a “nothing to lose” case. I cansay “i have nothing to lose but my form… ” but my form is critical. So I don’t know if I should be willing to lose it.

Ok I’ve written this late night so I might be rambling a bit. But I suppose you get the gist of it. As for the case I described yesterday, I think I’ll go for the long shot. I’ll assume I’m just practising. And go for it. If I do succeed, great. Else, all i lose is my form 😛